The United States operates on a 'deficit' economy, and it has ever since the passage of the Federal Reserve Act in 1913 and the confiscation of US gold in 1933. Prior to that, the US had operated as a 'barter' economy.
It is the 'barter' economy that most Americans believe is in operation today, and it is that fundamental flaw in understanding that makes spin doctors so effective in spinning their web of confusion.
In a 'barter' economy, something of value is exchanged for something of value. To have value, it must have substance, it must be acceptable in exchange for goods and services to the general public, and its supply must be finite -- that is to say, it has to be sufficiently rare as to maintain its value.
In the US economy, the Currency Act of 1793 set the value of American currency as a weight of gold based on the Dutch unit of measure called the 'Thaler' -- what we now call a Troy ounce. The 'thaler' became Americanized as the 'dollar' and it was a unit of measure for a substance of value.
With the confiscation of gold in 1933, the Gold Standard was repealed and replaced by the less-valuable Silver Standard. Suddenly a 'thaler' was not gold, but a weight of silver.
The Federal Reserve began issuing dollar bills called 'Silver certificates' and declared them redeemable in silver. These certificates of weight were replaced in 1963 by the Federal Reserve Note which promised redemption in 'Lawful US Money'. The Currency Act of 1793 declared one 'thaler' of gold to be 'Lawful US Money' -- and has never been repealed by Congress.
So when people demanded redemption of their Federal Reserve Notes in 'Lawful US Money’ the face of the note was changed to read, "This bill is legal tender" -- in effect, declaring a measure of the weight of a substance is now the substance it is supposed to weigh. Like declaring a 'quart' to be milk, rather than a MEASURE of milk.
Of course, it was theft, remains an unpunished theft, it was perpetrated by the money trust that controls the Federal Reserve (which is neither 'federal' nor is it a 'reserve') and made possible the very thing the Fed was ostensibly created to prevent -- inflation, deflation, recession and depression.
But it is a fait accompli, and our economy now depends on it. Turning our economy back from a debit-based economy to a barter economy is as possible as turning a pickle back into a cucumber.
A debit-based economy REQUIRES high deficits to make it work. Investment, production and job growth DEPEND on high national debt. Reducing the debt weakens the overall economy.
By way of analogy, let's take a family making, from all sources, about fifty thousand a year. Take that family's credit away from them. No credit cards, no loans, cash only.
What kind of car can they afford? They would have to save up to buy a new car. What about their housing? How long would it take YOU to save up enough to buy your own home for cash? What about that new fridge? No credit cards, no revolving credit, just cash.
A family making a thousand dollars a week would be just getting by. Suppose we are talking about a family making $100,000 per year, about two thousand dollars per week, and a member of the American 'rich'?
What kind of car would THEY drive? (Still unlikely to be new). They could probably save up and buy themselves a house in about 10 years. But it would be a starter home. They could buy a new fridge or stove or TV set, but that might put a dent in their home savings account.
Give them back their credit cards, revolving charges, mortgage and car loans, and they are living the American Dream. The family making a hundred thousand a year live in a nice home in the suburbs, commutes to work in an expensive SUV, and has both new fridges AND nice retirement savings accounts.
The family making fifty grand a year drive nearly-new mini-vans, have nice, but smaller, homes in less expensive neighborhoods and sometimes still have to choose between retirement contributions and big-ticket items, but, thanks to a debit-based economy, still live better than they would making twice as much but paying cash for everything.
It is in the interest of the banking and lending institutions to continue to lend them money against their accumulated equity because, a) it increases their profits; and b) the collateral is 'real' property, whereas the 'money' is an illusion -- in reality, nothing but a bookkeeping entry.
America's economy MUST be in debt in order to prosper. If you doubt me, look back to when we finally balanced the budget and paid off the national debt in the late 1990's. The economy began to flag and sputter into recession two full quarters before the end of the Clinton administration.
The attacks on 9/11 and the wars in Iraq and against Afghanistan have forced the government to pull its credit cards out of retirement and -- Voila! -- jobs get created, personal income increases, flagging industries like manufacturing post their best gains in twenty years, and the government starts offering tax cuts (that further reduce any chance of a surplus) -- and the numbers speak for themselves.
The value of US currency today is based on America's future earnings potential and its collateral assets, just like your credit card limits.
The higher your credit card balances get, the more credit increases you are offered. You then buy more, which creates demand for increased production, which creates demand for new jobs, etc.
That's how things work. Everything else is smoke and mirrors to buy your votes.
Using your own 'money'.
